3 cheap growth stocks near their 52-week lows to buy and forget

Has all the recent market volatility – most of it bearish – motivated you to focus less on the short term and more on the long term? If so, you are not alone. This year’s significant pullback reminds us that watching stocks fall almost daily is not only painful, but can really confuse your head.

There is an upside to this massive corrective move, however. That is to say, some very good growth stocks have been significantly devalued. If you can muster the guts and the cash to take the plunge, here are three cheap things to think about picking up while they’re down.

1. Meta

Yes, Metaplatforms (META 7.19%) struggles with the downside of size. Not only does Facebook’s monthly user base appear to be peaking at just under 3 billion, but records on WhatsApp and Instagram are also flattening out. Revenues and profits decrease accordingly. Its first-quarter earnings per share fell from $3.30 to $2.72 — one of the biggest declines in year-over-year earnings.

These are all signs that the organization may be running out of people willing and able to use its sites, though it’s no exaggeration to suggest that society has grown weary of the toxic sides of these platforms. Whatever the reason, the stock has fallen 58% in less than a year. But the market ignores that Meta fixes what’s broken.

Take the example of Tuesday’s introduction of new monetization tools for Facebook and Instagram content creators. Not only does the company intend to directly pay creators more from 2024 – democratizing great content – ​​but it also plans to allow a creator’s followers on other platforms to connect through a Facebook group. . The Reels Play platform will also open up to more participants, and Meta is even planning a Creators Marketplace for digital content creators to launch and market their personal content brands.

Better and better organized content is only one aspect of Meta’s revitalization plan, although it is important. Another is the recent reveal of its Crayta social world and game-making platform, moving the metaverse ball further down the court.

The world will always want an online gathering place. Meta is taking some smart steps that should help make it the preferred space, although it takes time for those efforts to bear fruit.

2. Micron

It became a predictable, almost boring cycle. Manufacturers of computer memory – DRAM as well as storage – are not making enough chips to meet demand. So all of them increase production, too much, which ends up undermining prices. They then curb production because of these low prices, but do so too aggressively, only to reduce the supply needed. The limited supply leads to a spike in memory prices, which again encourages the expansion of production. You had the idea.

Even before the economic headwinds started blowing, DRAM prices were down from their mid-2021 peak. Same for hard drives. It’s really when the memory chip maker’s actions Micron (MU 3.95%) began their 40% pullback which was only exacerbated by the tech market’s sell-off. If historical memory price trends continue, prices could decline further before beginning to recover. This will continue to play against Micron’s shares, even though their price is six times very cheap compared to expected earnings per share this year and less than five times expected net income for next year.

If you can step back and look past all the noise of the price cycle, however, you’ll find that holding Micron stock is worth the wild swings. The company’s revenue is four times greater than its revenue just 10 years ago, and its typical operating income has grown even further. Perhaps most importantly, Micron shares are worth nine times what they were worth a decade ago despite their recent pullback.

MU data by YCharts.

Everything indicates that the need for computer memory continues to grow, even if the industry still struggles to balance supply and demand. Specifically, investors who have bought into this perpetually volatile trend on the declines of these stocks have done very well, given enough time.

3.Incyte

Finally, add Incyte (INCY 4.56%) to your list of beaten stocks to store in your portfolio.

Incyte is a biopharmaceutical company primarily focused on unmet medical needs. Its flagship drug Jakafi targets a specific form of bone cancer called myelofibrosis, although it has a handful of other drugs in its portfolio and even more in its pipeline. Its recently launched eczema treatment, Opzelura, generated nearly $13 million in revenue for the quarter ending March. It’s a good start for a new product in a small but competitive market.

Not every investor’s cup of tea. Jakafi is Incyte’s sole breadwinner, generating around $2 billion in annual sales. Although an effective treatment for its approved uses, these indications are largely limited to patients with a somewhat rare condition who have not responded well to first-line treatments. In the same way that a stock portfolio should be diversified across multiple sectors, a pharmaceutical company’s portfolio would also – ideally – be diversified.

For investors who can handle above-average risk, this stock’s 30% decline over two years is a chance to connect with a fast-growing company as stocks are only listed at 23 times earnings. expected this year. Projected 15% sales growth for the coming year, led by Jakafi, will likely improve earnings per share by more than 40%, resulting in a forward-looking price-to-earnings ratio of just 16.

However, this is still only the beginning.

While it might be a one trick pony right now, it would be a smart horse to bet on. The company believes Jakafi could become a $3 billion franchise before it peaks. That’s 50% sales growth that will likely lead to much greater earnings growth. Meanwhile, Incyte has 10 different pivotal drug trials underway, paving the way for more near-term product launches, and another 19 trials in the “proof of concept” phase that could become revenue-generating products. here a few years. The market is simply not taking into account the potential of this company’s pipeline or of Jakafi itself.

Garland K. Long